Your Money_ The Missing Manual - J. D. Roth [13]
Imagine that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? What would you do with the money?
Now imagine that you visit your doctor and she tells you that you have 5–10 years left to live. She says that you won't feel sick, but you'll have no notice of the moment of your death. What would you do in the time you have left? Would you change your life? How?
Finally, imagine your doctor shocks you with news that you have only 24 hours left to live. If you only had a day to live, what dreams would you have left unfulfilled? What would you wish you had finished? What would you wish you had done or been? What would you have missed?
These questions are powerful tools for figuring out what's important to you. If you take the time to really think about them and answer them honestly, they can help you clarify your personal values and set meaningful goals. For more about life planning, check out Kinder's website (www.kinderinstitute.com) or pick up a copy of his book.
Setting SMART Goals
Once you've decided what's important to you, it's time to set SMART goals.
Nobody's sure exactly who created the SMART goal framework (which you may have encountered at work), though some give credit to management consultant Peter Drucker. SMART goals are Specific, Measurable, Achievable, Relevant, and Timed. That might sound cheesy, but it's actually quite effective and can help guide you to success.
Here's a closer look at each aspect of a SMART goal:
Specific. You're more likely to accomplish a specific goal than a vague one because you know exactly what you're supposed to do. In The Power of Full Engagement (Free Press, 2004), Jim Loehr and Tony Schwartz describe several studies that demonstrate the power of specific goals. In one, a group of women agreed to do a self-exam for breast cancer during the coming month. All of those who specified when and where they'd complete the exam did so, but only half of those weren't specific actually followed through. So don't just set a goal to fund your retirement; define when, where, and how you'll do this. For example, say "On Thursday, I'll contact HR to set things up so 10% of my paycheck automatically gets transferred to my 401(k)."
Measurable. If you can't measure your progress, you can't know when you've met your goal. "I want to be rich" isn't measurable, but "I want to have $100,000 in savings" is. Such goals let you track your progress, stay focused, and know when you've finished.
Achievable. There's magic in thinking big: Big goals force you to stretch, to look beyond yourself. But make sure your goals are realistic. There's a difference between, "I want to be the richest person in the world!" and "I want to have $500,000 saved by the time I'm 50." The latter might be tough, but it's doable; the former is just a pipe dream.
Relevant. As discussed in the previous section, your financial goals should relate to your values and your situation. You're far more likely to achieve goals that reflect your priorities.
Timed. The final step is to give your goal a timeline. It's okay to leave some goals open-ended, but most of your objectives should have a target completion date. For maximum impact, don't just pick a relative duration like "a few months"; specify an actual date when you want to complete your goal.
Why go to all this trouble? Because when you describe your goals in exact terms, you're more likely to succeed. If you create meaningful, smart financial goals—and follow through with them—you'll make better choices about money (and be happier, too).
On The Money: The How of Happiness
During her nearly 20 years of research into goals and happiness, Sonja Lyubomirsky—author of The How of Happiness (Penguin, 2008)—has learned a lot about what makes an effective goal. In addition to the elements of the SMART framework, she says that goals should be:
Positive. Positive